Prosecutor brands Martha Stewart a liar

Prosecutor says Stewart a liar

Cox News Service

Published 6:30 am, Wednesday, January 28, 2004

NEW YORK — Prosecutors on Tuesday portrayed Martha Stewart and her stockbroker as liars and conspirators who repeatedly deceived investigators and the public to hide actions involving a 2001 stock sale.

Stewart's attorney called the government case "speculation, surmise and guesswork."

In her opening argument, Assistant U.S. Attorney Karen Patton Seymour said Stewart, who heads a domestic arts and media empire, had secret knowledge that prompted her sale of nearly 4,000 shares of ImClone Systems on Dec. 27, 2001.

"Investors didn't benefit from a secret tip like Martha Stewart had," Seymour told the jury of eight women and four men in the packed courtroom.

Seymour said that when federal regulators began looking into the sale, Stewart and Merrill Lynch & Co. broker Peter Bacanovic "decided to lie to investigators and come up with a coverup."

"She multiplied that lie by feeding it to investors in her own company," said Seymour, beginning three hours of opening statements from both sides.

The government is accusing Stewart of selling stock in ImClone after receiving a tip that the family of ImClone founder Sam Waksal was planning to sell its shares in the biotechnology company. The day after the sale, the company's stock plunged on the news that the Food and Drug Administration would issue a negative report involving an ImClone cancer drug.

Stewart, 62, who avoided about $46,000 in losses by selling, says she had an agreement with Bacanovic to sell if the stock fell to $60 per share. The government says there was no agreement.

Stewart's attorney, Robert Morvillo, said the case against his client was circumstantial.

"No witness will come into this courtroom during this trial and say, 'Martha told me to do something unlawful. Martha asked me to do something unlawful.' There will be no direct evidence along those lines," Morvillo said.

Morvillo sought to counter the portrayal of Stewart, describing her as a self-made woman who founded a multimillion-dollar company, Martha Stewart Living Omnimedia.

After opening arguments, executives from ImClone and Merrill Lynch testified, providing background information on their companies. Prosecutors had the Merrill Lynch official describe his firm's policies requiring brokers to never share information about clients.

U.S. District Judge Miriam Goldman Cedarbaum postponed further testimony until Thursday because an expected winter storm might prevent jurors from getting to the courthouse.

Prosecutors said future witnesses will support that there was a coverup and Stewart herself deleted part of a message from Bacanovic about ImClone.

The trial is expected to continue into March.

Bacanovic, 41, was indicted with Stewart in June. Both entered innocent pleas.

Bacanovic's attorney, Richard Strassberg, said the government rushed to judgment and "charged an innocent man." He said Bacanovic, who made a $450 commission on the ImClone sale, had previously advised Stewart to sell.

Strassberg sought to discredit the government's star witnesses, Bacanovic's assistant, Douglas Faneuil. He said Faneuil struck a plea deal and "has a free pass for any punishment in connection to his lies."

Faneuil, who has pleaded guilty to a related misdemeanor charge, is expected to testify that he was inundated with calls from Waksal family members wanting to sell shares, said Seymour, the government attorney. Seymour said Bacanovic, who was away on vacation, told Faneuil to "get Martha on the phone."

"He didn't want his friend, Martha Stewart, to be caught sitting on a stock that was about to be obliterated by bad news," Seymour said. She said Bacanovic knew sharing information about a client violated his firm's policies.

Strassberg said that if Faneuil did call Stewart, he did it on his own to impress the celebrity style maven.

"He did it because he was trying to be the big man," Strassberg said. "He did it out of inexperience, he did it out of foolishness."

Faneuil could testify as early as Thursday.

The five counts against Stewart carry a total maximum prison sentence of 30 years. If convicted, however, she would likely receive a less severe sentence under federal guidelines.